Strong Tenant Demand Spurs Tampa Apartment Market

"Construction levels are up this year, and once again, Tampa ranks among the top 10 nationally in multifamily development," says Steven M. Ekovich, first vice president and regional manager of the firm's Tampa office. "The amount of new renters in the area is nearly keeping pace with construction activity, and due to increased asking rents, cash flows are increasing."

Driving the multifamily market here are the 37,000 new jobs employers are projected to create this year, the report says. That's a 3% increase from last year. High-growth employment rates are forecast for nondurable goods manufacturing, especially coupled with the newly opened and growing Hernando County RailPark.

The M&M report expects developers to complete 3,450 units in 2004, a 15% increase from 2003. "Tampa is likely to attract 60,000 migrants over the next 18 months, and there is plenty of space to build new facilities in growing areas, especially in Hillsborough and Pasco counties," Ekovich says.

The vacancy factor is "stabilizing in the mid-8% range and is likely to remain at that level over the next 18 months as construction continues," the M&M executive says. "The region can expect a 10 basis-point increase in 2004, to 8.4%." The lowest vacancy rates in the region are found along the Gulf Coast due to easy access to beaches and seasonal activities, Ekovich says.

Asking rents in the Tampa metropolitan statistical area are "rising steadily and should improve by 1.8%, to $737 per month, this year," the broker says. "Tampa's rents are 20% below the national norm, which is one reason for such large volumes of in-migration to the area."

In the Central Tampa submarket, however, renters are paying some of "the highest asking rents in the region, due to its close proximity to office space, entertainment and nightlife," Ekovich says. Concessions are rising marketwide and will amount to 8% of asking rents in 2004, up from 6.9% a year ago.

On the investment sales side, the M&M report finds prices in the Tampa MSA "volatile due to continued high rates of construction." The median price per unit at the end of 2003 was $47,000, a 5% increase over the previous year and a 50% gain since 2000.

Demand for property is highest in South Tampa and the relatively dense Pinellas County, "due to their high barriers to entry, costlier rents and low vacancy," Ekovich notes. Cap rates are declining throughout the MSA and currently average 8% for suburban properties where concessions are offered.